Maryland enrollment soars in federal phone program

Enrollment in a controversial program that provides free cell phone service to low-income families has increased faster in Maryland than any other state in the nation, jumping nearly 90-fold since 2008 — renewing scrutiny on Capitol Hill over its management.

The Lifeline program, created in 1984 to soften the impact of telephone deregulation on low-income families, had nearly 509,000 subscribers in the state last year, up from 5,821 in 2008. Growth in Maryland was nearly 40 times greater than the national average.

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Critics and supporters of Lifeline raised concerns following a 2010 report from the Government Accountability Office that found subscribers who did not meet the program's eligibility requirements, and phones that were being resold on the Internet.

And when the Federal Communications Commission began targeted audits of the program — such as checking for people with more than the one phone allowed — it kicked more than 230,000 Marylanders off the program late last year.

"People were receiving duplicate phones — people were getting phones more than one to a household," Billy Jack Gregg, a communications consultant who presented the enrollment figures at a recent House subcommittee hearing on Lifeline, said in an interview. "It seems pretty clear from the numbers that more were being distributed than should have been."

The FCC already has tightened its review of applicants and subscribers, resulting in a 27 percent decrease in nationwide enrollment since last summer. And agency officials say they expect participation in both Maryland and other states to continue to decline.

Still, the program remains a target of conservative lawmakers, and Congress is considering several bills to limit its scope.

Participants and supporters say Lifeline provides a critical service for families who can't afford phones tocall employers when they're running late to work, for instance,or totake emergency calls from family.

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"Imagine being a poor person and trying to find a job without a phone," said Cleo Stamatos, a consumer advocate and consultant who works on telecommunications issues. "It is a program we know helps people find and keep employment."

Lifeline is funded through a surcharge on phone bills that tends to run between $1 and $2 a month, depending on usage. The money pays for $8.7 billion in programs administered by an independent non-profit overseen by the FCC.

Lifeline accounts for $2.2 billion of that spending. More than 13 million people are enrolled nationwide, according to FCC data.

Commercial phone carriers, which are reimbursed from the fund for participating, set up vans on city streets in Baltimore to accept Lifeline applications and distribute free phones. At least one group that serves low- and middle-income families has included information about the phone program in its mailings to clients.

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But why the program exploded in Maryland in particular remains a mystery. One possible factor: The state had among the lowest participation rates in 2008, and so there was more room to grow.

Subscribers such as West Baltimore resident Latonya Walker say the program is useful because it provides a consistent number to give potential employers. Walker has her own cell phone, too, but loses service if she fails to pay the bill.

"It comes in handy," said Walker, 39,who is seeking help from the employment firm America Works to find a job.

Walker's free plan provides 250 minutes a month, which she says is easy to burn through.

"You have to budget the time," she said. "But you still have a number that you can use to at least get a message."

Walker said it was easy to enroll in Lifeline but that companies do verify eligibility.

Several groups, including the Maryland Consumer Rights Coalition and the Maryland Creating Assets, Savings and Hope (CASH) Campaign, have pushed to expand participation in recent years.

The CASH Campaign included fliers about the program along with its own mailings. Robin McKinney, director of the Baltimore-based group, said people use it to help find jobs and stay in touch with family.

"All of those little things that we just take for granted, people are using them for," she said.

The consumer coalition and the CASH Campaign signed a letter this month pressing lawmakers to maintain the program.

To qualify for Lifeline, families must earn less than 135 percent of the federal poverty level — or less than about $31,790 for a family of four — or be eligible for other aid programs, such as Medicaid. Only one person in a household may sign up for the program.

Applicants apply to the phone companies, which receive up to $10 a month for each enrollee. The program does not directly subsidize the phone — only the service — but most carriers offer an inexpensive phone for free to entice customers.

The subsidy to cell carriers has been lucrative enough to fuel an explosion of providers offering the service — 29 companies have been approved by Maryland regulators.

New rules created in 2005 permitted pre-paid wireless companies such as TracFone and Cintex into the program. Rockville-based Cintex received $5.7 million in the first six months of 2012 to provide Lifeline to Maryland residents. TracFone, based in Florida, received $4.3 million during that period.

Messages for Cintex and Tracfone were not returned. CTIA, a trade association representing the wireless industry, declined to comment.

The 28-year-old program was at the center of an Internet controversy in 2009 that began with an anonymous e-mail that warned free "Obama phones" were being distributed to welfare recipients.

Then, shortly before last year's presidential election, a video from an Obama supporter went viral touting the program. "Keep Obama in president, you know," the woman in the video said. "He gave us a phone."

Lifeline faced a new round of scrutiny on conservative talk radio programs — and prompted legislation to eliminate it altogether — even though nonpartisan fact-checkers dismissed claims that the Obama administration had expanded the program andthat Lifeline was subsidizing smart phones.

Lifeline was created by President Ronald Reagan and was expanded to include cell phone carriers under President George W. Bush.

Gregg's analysis found that twice as many people in Maryland are subscribed to the program than meet the income eligibility requirement — a finding that generated a heated discussion during a hearing in late April of the House Communications and Technology Subcommittee.

Advocates and FCC officials pushed back on the assessment. Gregg's findings rely only on the income eligibility requirement. People also may subscribe if they are eligible for other federal aid programs but earn more than 135 percent of the poverty line.

Mark Wigfield, an FCC spokesman, said the agency believes the participation rate in Maryland is less than 100 percent of those eligible.

Some lawmakers in Congress are looking at legislation to rein in the program. A bill in the House, sponsored by Republicans, would drop cell phones from the program. Sen. Claire McCaskill of Missouri is the only Democrat who supported a recent vote in the Senate that called for ending the program altogether.

McCaskill's opposition came after she received a solicitation at her home for the program in 2011, according to her office. The mailing promised a free cell phone without requiring proof of eligibility.